Many countries are facing declining growth rates due to the coronavirus pandemic, and Morocco is no exception. Given lockdowns and flight restrictions implemented worldwide from March, the tourism and hospitality sectors — usually the third-largest component of GDP — have suffered enormous losses and almost collapsed during the first 90 days of the global response to COVID-19, the disease caused by the novel coronavirus.
In the latest World Bank report, “Morocco Economic Monitor,” it is projected that the Moroccan economy will contract in the next year, which would be the first severe recession since 1995. “Over the past two decades, Morocco has achieved significant social and economic progress due to the large public investments, structural reforms, along with measures to ensure macroeconomic stability,” the report notes.
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The World Bank’s forecast indicates that Morocco’s real GDP is projected to contract by 4% in 2020, which is a sharp swing from the 3.6% positive growth rate that was predicted before the pandemic. Consequently, the bank expects Morocco’s fiscal deficit to widen to 7.5% of GDP in 2020, around 4% more than expected before the COVID-19 outbreak.
Meanwhile, the country’s public and external debt is to set rise but still remains manageable. In assessing the government’s well-regarded response to the crisis, the World Bank puts an emphasis on moving from mitigation to adaptation, which is key “to ensuring a resilient, inclusive, and growing Moroccan economy.” It also points out that despite this year’s setbacks, Morocco can still “build a more sustainable and resilient economy by developing a strategy to adapt,” similar to what it has done to address issues of climate change and environmental challenges.
A Strong Position
When viewed in comparison to the rest of North Africa and the Middle East, let alone its sub-Saharan neighbors, Morocco is in a strong position to capitalize on global changes as companies rethink supply chains and vulnerabilities in logistics. Globally, and especially in Europe and the US, corporations are rethinking their reliance on China as a key supplier, and Morocco is poised to benefit, as I mentioned in a previous article on Fair Observer.
The European Union, in particular, is already calling for “strategic autonomy” in sectors such as pharmaceuticals by focusing on more reliable and diversified supply chains. The new strategy is expected to entail tighter rules on human rights and environmental protection on imported goods, a move that experts say would boost local manufacturers, and Morocco is near the top of the list.
Guillaume Van Der Loo, a researcher at the Center for European Policy Studies in Brussels, spoke to DW about the opportunities for Morocco. “If you look at Morocco, there are more favorable conditions there for specific areas in particular, in relation to renewable energy and environmental related sectors, [and] Morocco is quite a frontrunner and the EU tries to chip in on that,” he said. “The idea that the European Commission has already expressed about diversifying supply chains could be beneficial for Morocco and that could accelerate negotiations on the new trade agreement.”
Morocco is one of few countries that have free-trade deals with both the United States and the European Union, and it is seen as an entry point for Western investment in Africa. As Alessandro Nicita, an economist at UN Conference on Trade and Development (UNCTAD), says, “Morocco is very well positioned because of its proximity [and] because it’s part of [the] EU’s regional trade agreements, its rules of origin are kind of integrated with those of the EU.”
Yet Morocco faces challenges in grabbing these economic opportunities, including restrictive capital controls and a paucity of high-skilled workers. Having been overhauled in the 1980s, the country’s education system “has failed to raise skill levels among the country’s youth, making them especially unsuitable for middle management roles,” DW reports.
Another concern has been raised by the National Competitive Council in Morocco, which said that if the country was to move forward efficiently, it had to end monopolies in key sectors. These include fuel distribution, telecoms, banks, insurance companies and cement producers, which have created an oligopolistic situation in the country.
The Oxford Business Group (OBG) has also released a study focusing on the success that Morocco is achieving in terms of combating the effects of COVID-19. “Morocco boasts a robust and diversified industrial base, developed through years of heavy investment, which enabled the country to take actions to control the pandemic and mitigate supply chain disruptions,” the OBG notes. The investment-friendly climate and robust infrastructure, with Africa’s fastest train network, will enhance the country’s attraction for manufacturers looking to relocate Asia-based production, as supply-chain disruptions due to distant and vulnerable suppliers have resulted in many companies pursuing a strategy of near-shoring, the report adds.
So, Morocco’s future in manufacturing, agro-business and technology may well determine the country’s capacity to recover its positive GDP growth rate as it overcomes the COVID-19-induced recession. To do so, it will need a robust marketing campaign as a country for reliable and relatively inexpensive supply chains and a skilled workforce.
*[An earlier version of this article was published by Morocco on the Move.]
The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.